BP Appears in Court to Enter Criminal Plea Over Spill

BP Plc (BP/) appeared in federal court in New Orleans to answer U.S. charges brought over the 2010 Gulf of Mexico oil spill, entering a not guilty plea that won’t affect its $4 billion criminal settlement with the U.S.

BP’s deal with the Justice Department announced Nov. 15 requires it to plead guilty and pay $4 billion to end all criminal charges related to the largest offshore oil spill in U.S. history. Under the plea deal, BP will enter a formal guilty plea at a later hearing.

“At this time all I can do is take a not guilty plea,” U.S. District Judge Ivan Lemelle in New Orleans said at a court hearing today. Lemelle said he conferred with Chief Judge Sarah Vance, who has been assigned the case. “Anything else will be done before her” at a later date, Lemelle said.

BP’s settlement with the U.S. includes a record $1.256 billion criminal fine, which would be paid over five years. BP agreed to five years’ probation and extensive monitoring of its drilling operations, according to court papers.

Along with the criminal fine, the resolution with the Justice Department includes a total of $2.4 billion that will be paid to the National Fish & Wildlife Foundation over five years. Another $350 million will be paid to the National Academy of Sciences over that same period.

Photographer: Kari Goodnough/Bloomberg

A boom is deployed to contain oil in Perdido Bay in Orange Beach, Alabama, on June 19, 2010. The BP Plc oil spill, which began when the leased Transocean Deepwater Horizon oil rig exploded on April 20, gushed as much as 60,000 barrels of oil a day into the Gulf of Mexico, the government said. Close

A boom is deployed to contain oil in Perdido Bay in Orange Beach, Alabama, on June 19,... Read More

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Photographer: Kari Goodnough/Bloomberg

A boom is deployed to contain oil in Perdido Bay in Orange Beach, Alabama, on June 19, 2010. The BP Plc oil spill, which began when the leased Transocean Deepwater Horizon oil rig exploded on April 20, gushed as much as 60,000 barrels of oil a day into the Gulf of Mexico, the government said.

“This is a very substantial criminal penalty,” said Ed Sherman, a law professor at Tulane University in New Orleans. “This is much more than a slap on the wrist,” he said.

Highly Regulated

“They are going to be more highly regulated than any other oil company in history,” Sherman said, pointing to requirements in the agreement for monitoring BP’s oil and gas operations. “The monitoring is particularly focused on safety.”

Beyond the $4 billion criminal settlement, BP will pay an additional $525 million to resolve claims by the Securities and Exchange Commission that the London-based company underestimated the size of the spill to bolster stock prices.

BP agreed to plead guilty to 14 criminal counts including 11 for felony manslaughter for the 11 people who died when the Deepwater Horizon drilling rig exploded and sank, according to the Justice Department.

The company also pleaded guilty to one misdemeanor count under the Clean Water Act, one misdemeanor count under the Migratory Bird Treaty Act and one felony count of obstruction of Congress, the U.S. said.

Congress

Thirteen of the 14 criminal charges against BP are related to the accident itself and are based on negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon, BP said in a Nov. 15 press release. The final count involves BP’s communications on flow rate estimates to a congressional subcommittee, the Justice Department said in a court filing.

BP officials told Congress in May 2010 that the company’s “best guess” estimate of the spill flow rate was about 5,000 barrels a day, even though some of its own scientists had suggested much more oil was flowing into the Gulf, according to the Justice Department.

The U.S. also charged two BP well-site managers with involuntary manslaughter and a former executive with obstruction and false statements. Lawyers for the three men said their clients were innocent. The men are scheduled to be arraigned tomorrow in federal court in New Orleans.

Evidence Destruction

Kurt Mix, a former BP engineer, had previously been charged with destroying evidence in the probe of the spill. Mix, who worked on BP efforts to estimate the amount of oil leaking from the well, has pleaded not guilty.

The blowout and explosion aboard the Deepwater Horizon drilling rig in April 2010 killed 11 workers and started millions of barrels of crude leaking into the gulf. The accident prompted hundreds of lawsuits against BP; Transocean Ltd. (RIG), the Vernier, Switzerland-based owner and operator of the rig; and Houston-based Halliburton Co. (HAL), which provided cementing services.

The Justice Department sued BP in December 2010, alleging the company failed to prevent or contain the spill and seeking fines for each barrel of oil discharged.

The department’s lawsuit hasn’t been settled and BP remains at risk for as much as $17.6 billion in potential fines from alleged violations of the Clean Water Act and demands by the U.S. and Gulf states for enough money to restore the region’s coastline and waters to their condition before the spill.

The government estimated that more than 4 million barrels of oil were spilled. If BP is found to be grossly negligent, a legal standard the government would have to prove showing the accident resulted from a conscious BP act or omission, it could be fined as much as much as $4,300 per barrel.

Pollution Fines

BP set aside $3.5 billion to pay potential Clean Water Act fines, using its own estimate of 3.2 million barrels and a maximum fine of $1,100 per barrel without gross negligence.

U.S. District Judge Carl Barbier in New Orleans, who’s overseeing much of the spill litigation, has set Feb. 25 for a nonjury trial to apportion fault and decide whether BP is liable for gross negligence.

BP reached a settlement with most non-government plaintiffs in March, agreeing to pay an estimated $7.8 billion. That settlement postponed the first trial date to determine liability for the disaster. Barbier is considering whether to approve the settlement.

Florida, Texas

The settlement excluded claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill. It also doesn’t cover federal government claims and those of Gulf Coast states Louisiana and Alabama, or lawsuits against co-defendants.

BP and lawyers representing non-government victims of the spill won preliminary court approval of the proposed partial settlement agreement in May and argued for final approval at a hearing on Nov. 8. A decision is pending.

The criminal case is U.S. v. BP Exploration and Production Inc., 12-00292, U.S. District Court, Eastern District of Louisiana (New Orleans). The criminal cases against the individuals are U.S. v. Kaluza, 12-cr-00265; and U.S. v. Rainey, 12-cr-00291, U.S. District Court, Eastern District of Louisiana (New Orleans).

The government civil case is U.S. v. BP Exploration & Production Inc., 2:10-cv-04536, U.S. District Court, Eastern District of Louisiana (New Orleans). The lawsuit is part of In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Allen Johnson Jr. in federal court in New Orleans, allenmct@gmail.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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